Thesis (MBA)--Stellenbosch University, 2008. / ENGLISH ABSTRACT: The budgeting process is an integral part of the annual business cycle of most organisations. The budget consists of numerous uncertain inputs, which are frequently used to produce a single EBIT figure. This implies that there is a risk of not achieving the budget that is not quantified and apparent from the prepared budget. In this report, the differences between the budgets of two business units of Exxaro Resources were analysed to gain a better understanding of the information hidden beyond the figures quoted on the surface. The budgets of Exxaro KZN Sands, a heavy minerals producer, and Zincor, a zinc refinery, were analysed to compare the respective risk approach of each. Simplified deterministic models were first constructed that contained the most important budget risk drivers. These were validated with comparisons to the official budgets. Historical actual data from 2006 and 2007 was then obtained from the business archives for the risk drivers. Probability distributions were then generated that fit the distributions of the historical data. These risk distributions were then used as input variables in a Monte Carlo simulation, performed in Crystal Ball. The EBIT for each business was thus simulated as a probability distribution. The simulation showed that the two business units applied very different approaches to budget risk. The actual budgeted EBIT of Exxaro KZN Sands of a loss of R167 579 945 had a more than 99% chance of being exceeded, showing a very conservative, worst case approach to budgeting. Zincor had only a 29% probability of exceeding their budgeted EBIT of R202 783 091, and incorporated a much larger risk of not achieving EBIT into the budget. The budgets of both business units were not suitable for the most important functions of budgeting, namely target setting, strategic planning and valuation of the business. It is recommended that Exxaro implements a procedure to standardise the risk approach to budgeting in the organisation. The budget process must firstly have guidelines to indicate how risk drivers’ values should be chosen for the official budget. Recommendations regarding average values, best three months or any other methodology will ensure that different business units follow a comparable approach. Secondly, Monte Carlo simulation must be performed on simplified business models. The KPI trees currently being used for continuous improvement provide a base model for this purpose. The Monte Carlo simulation will provide a more sophisticated and quantified analysis of risk, and give a further indication of the inherent variability of a specific business unit. Lastly, scrutiny of the Monte Carlo can indicate the biggest drivers of risk. Measures can then be implemented to better understand, or reduce, the variability of the main risk drivers. This will lead to more accurate budgeting, and a better understanding of the inherent budget risk. / AFRIKAANSE OPSOMMING: Die begrotingsproses is ‘n integrale deel van die jaarlikse besigheidsiklus van meeste organisasies. Die begroting bestaan uit etlike onseker insette, maar word meestal gebruik om ‘n enkele syfer vir inkomste te bereken. Dit beteken dat daar ‘n risiko is dat die begroting nie behaal gaan word nie, wat nie duidelik na vore tree in die begroting nie. In hierdie verslag word die verskille tussen die begrotings van twee besigheidseenhede van Exxaro Resources geannaliseer om insig te verkry rakende die inligting versteek agter die ooglopende getalle. Die begrotings van Exxaro KZN Sands, ‘n swaar minerale produsent, en Zincor, ‘n zink rafinadery, is geannaliseer om die onderskye risikobenaderings te vergelyk. Die eerste stap was om vereenvoudigde deterministiese modelle te bou wat die belangrikste begrotingsrisikodrywers bevat het. Die modelle is gevalideer deur die winste te vergelyk met die amptelike besigheidsbegrotings. Historiese data van 2006 en 2007 is versamel van die risikodrywers. Verdelings van waarskynlikheid is toe gekies wat die historiese data beskryf het. Die verdelings is gebruik as inset veranderlikes in ‘n Monte Carlo simulasie, gedoen in Crystal Ball. Die wins van elke besigheid is dan as ‘n waarskynlikheidsverdeling gegenereer. Die simulasie het aangetoon dat die twee besighede uiteenlopende benaderings tot begrotingsrisiko het. Die begrote verlies van R167 579 945 van Exxaro KZN Sands het ‘n hoër as 99% kans gehad om behaal te word. Dit dui op ‘n uiters konserwatiewe benadering, met die mees pessimistiese waardes vir risiko drywers in die begroting. Zincor het sleg ‘n 29% waarskynlikheid gewys om die begrote wins van R202 783 091 te behaal, en het aansienlik meer risiko in die begroting ingebou. Beide die benaderings was nie geskik vir meeste van die funksies waarvoor begrotings gebruik word nie, naamlik doelwitstelling, strategiese beplanning en waardasie van die besigheid. Dit word aanbeveel dat Exxaro ‘n prosedure implementeer om die risikobenadering te standariseer. Die begrotingsproses moet eerstens riglyne hê rakende die benadering tot risikodrywers. Daar moet aanbeveel word of gemiddelde waardes, beste drie maande of ‘n ander benadering gevolg moet word, om seker te maak dat verskillende besigheidseenhede dit vergelykbaar uitvoer. Tweedens moet Monte Carlo simulasie gedoen word op vereenvoudigde besigheids modelle. Die KPI bome wat tans vir deurlopende verbetering gebruik word is ‘n ideale basis vir die proses. Die Monte Carlo simulasie bied ‘n meer kwantifiseerbare benadering tot risiko analise, en dui ook aan wat die verwagte afwyking in ‘n besigheid se inkomste is. Laastens gee die Monte Carlo simulasie ‘n aanduiding oor wat die groot risikodrywers in die besigheid is. Stappe kan dan geimplimenteer word om die risikos te bestuur. Die resultaat sal meer akurate begrotings wees, asook meer insig in die inherente risiko in die begroting.

本文主要探討股票選擇權的隱含波動率是否能夠有效反應公司的財務風險與違約風險，並使用Merton (1974)與Black and Scholes (1973)的選擇權評價模型推導出每日的負債權益比率，作為公司財務風險的代理變數；違約風險的代理變數則是使用Bandyopadhyay (2007)的風險中立違約機率與真實世界違約機率。首先，本文觀察到隱含波動率和股票報酬率之間的確存在負向關係，除此之外，也發現非系統隱含波動率與股票報酬率之間也有負向關係。進一步研究非系統隱含波動率是否能夠反應公司風險，結果顯示當公司的財務風險與違約風險增加時，非系統隱含波動率會上升。最後，本文比較非系統隱含波動率與GARCH模型的波動率對公司財務風險與違約風險的資訊內涵，並執行包圍檢定、工具變數兩階段迴歸分析與非包覆模型的檢定，發現非系統隱含波動率的資訊內涵無法包圍GARCH模型的波動率，但兩者的資訊內涵互相交集。

This thesis is concerned with the relationships between profit, profit persistence, risk and competition within the US commercial bank sector. In particular, the thesis asks three questions: how profit and profit persistence are affected by changes in regulation designed to enhance competition; how profit persistence varies over time according to changes in market and economic conditions; how different aspects of banks' risk is affected by competition and market structure. Understanding the nature of these relationships is important given the prominent role banks play in the allocation of resources, the provision of capital to the economy and the stability of the financial system. Moreover, these roles in turn, have an effect on bank performance and wider economic growth and stability. Such issues have especially come to prominence following the financial crisis and thus there is a need for empirical evidence on which to base policy. To examine these relationships the thesis implements panel estimation techniques and obtains data on all commercial banks, primarily over the period 1984-2009, thus including births and deaths. The key findings show, first, that profit persistence is relatively low compared to previous US banking studies and compared to manufacturing firms. Moreover, persistence varies with regulatory changes, although not always in the expected direction, notably the increase in persistence following the 1999 Gramm-Leach-Bliley Act. Second, additional time-variation in persistence is linked to bank specific, market structure and economic factors. Notably, persistence varies with bank size and market share, market concentration and output growth, but the precise nature of these relationships varies across the sample and by bank size. Third, that there is a difference in the nature of the relationship between competition and loan risk on the one hand and competition and total risk and leverage on the other. We also find that the relationship between risk and market structure varies according to bank size and that the economic cycle influences banks' risk. The implications and contribution of this thesis lie in establishing empirical evidence for understanding the nature of the relationships between competition, profits and risk. This is particularly prescient given the move towards new regulation following the financial crisis. Key results here show that no simple relationship exists between bank size or market concentration and competition and risk, therefore policy should account for such differences, whether according to bank size or type of risk.

Le sujet principal de cette thèse est la physique des verres de spin. Les verres de spin ont été introduits au début des années 70 pour décrire alliages magnétiques diluées. Ils ont désormais été considerés pour comprendre le comportement de liquides sousrefroidis. Parmis les systèmes qui peuvent être décrits par le langage des systèmes desordonnés, on trouve les problèmes d'optimisation combinatoire. Dans la première partie de cette thèse, nous considérons les modèles de verre de spin avec intéraction de Kac pour investiguer la phase de basse température des liquides sous-refroidis. Dans les chapitres qui suivent, nous montrons comment certaines caractéristiques des modèles de verre de spin peuvent être obtenues à partir de résultats de la théorie des matrices aléatoires en connection avec la statistique des valeurs extrêmes. Dans la dernière partie de la thèse, nous considérons la connexion entre la théorie desverres de spin et la science computationnelle, et présentons un nouvel algorithme qui peut être appliqué à certains problèmes dans le domaine des finances.

Thesis (Ph. D.)--Ohio State University, 2006. / Title from first page of PDF file. Includes bibliographical references (p. 72-76).

A guaranteed minimum income benefit (GMIB) is a long-dated option that can be embedded in a deferred variable annuity. The GMIB is attractive because, for policyholders who plan to annuitize, it offers protection against poor market performance during the accumulation phase, and adverse interest rate experience at annuitization. The GMIB also provides an upside equity guarantee that resembles the benefit provided by a lookback option. We price the GMIB, and determine the fair fee rate that should be charged. Due to the long dated nature of the option, conventional hedging methods, such as delta hedging, will only be partially successful. Therefore, we are motivated to find alternative hedging methods which are practicable for long-dated options. First, we measure the effectiveness of static hedging strategies for the GMIB. Static hedging portfolios are constructed based on minimizing the Conditional Tail Expectation of the hedging loss distribution, or minimizing the mean squared hedging loss. Next, we measure the performance of semi-static hedging strategies for the GMIB. We present a practical method for testing semi-static strategies applied to long term options, which employs nested Monte Carlo simulations and standard optimization methods. The semi-static strategies involve periodically rebalancing the hedging portfolio at certain time intervals during the accumulation phase, such that, at the option maturity date, the hedging portfolio payoff is equal to or exceeds the option value, subject to an acceptable level of risk. While we focus on the GMIB as a case study, the methods we utilize are extendable to other types of long-dated options with similar features.

Online group-buying means that a crowd of consumers combine with each other and massively purchase a certain object, and therefore can attain to a lower price(Kauffman et al. 2002). In group-buying transaction model, consumers usually recognized the risks specially. Therefore, the feedback mechanisms were used to reduce the risks and increase the trust. In general electronic shopping, many past studies especially explore the use of feedback mechanisms(Dellarocas 2003; Singh et al. 1991). However, there are few studies about the effect of feedback mechanisms on online group-buying. Compare to general electronic shopping, shopping in group-buying will include more uncertainty and risk. Thus, this study will use experimental methodology to explore the feedback mechanisms that how to impact the behavior of group-buying consumers with forum and rating feedback mechanisms. Our study mainly explores whether the feedback mechanisms affect the consumers¡¦ trust in seller¡¦s credibility and perceived risk in group-buying, and whether the intention to join group-buying is influenced by the trust in seller¡¦s credibility and perceived risk. The study shows that the online group-buying consumer behavior is influenced by the feedback mechanisms exactly. The ratings affect consumers¡¦ perceived financial risk, perceived time risk and perceived psychological risk. The forum affect consumer¡¦s psychological risk perceived, and the experience of the initiator who initiates group-buying also affect the consumer¡¦s time risk perceived. The intention to join group-buying is influenced by the trust in seller¡¦s credibility and perceived risk.

Tre tydliga svagheter kunde identifieras i den globala banksektorn under den stora finanskrisen år 2007. Dessa tre svagheter var brist på kapital av tillräcklig kvalitet för att kunna hantera förluster, en för tätt sammankopplad finansmarknad samt otillräcklig likviditetshantering och för små likviditetsbuffertar. I syfte att främja en banksektor med starkare motståndskraft togs regelverket Basel III fram för att reglera bland annat bankernas likviditet, kapitaltäckning och riskhantering. De nya kapitaltäckningskraven från Basel III innebär bland annat att kärnprimärkapitalrelationen ska uppgå till minst sju procent senast år 2019, Sverige och Storbritannien har dock valt att ställa högre krav på sina storbanker. Kärnprimärkapitalet är den del av primärkapitalet som håller högst kvalitet och har bäst förmåga att absorbera förluster. Europeiska bankmyndigheten (EBA) genomför årligen stresstester på bankerna inom Europeiska unionen (EU) med syfte att se hur bankerna kan hantera ogynnsamma scenarier. På liknande sätt genomför även Finansinspektionen stresstester på de svenska storbankerna.Syftet med denna studie är att ur ett internationellt perspektiv undersöka vilka resultat storbankerna i Sverige, Storbritannien och Tyskland uppnår i EBA:s stresstester för två olika år. Studien syftar även till att ur ett nationellt perspektiv studera hur de fyra svenska storbankerna Handelsbanken, SEB, Nordea och Swedbank klarar sig i Finansinspektionens egna stresstester över en fyraårsperiod. Slutligen syftar studien till att studera hur väl de fyra svenska storbankerna lever upp till de nya kraven som Basel III medför med avseende på kärnprimärkapitalrelation för åren 2006, 2011 och 2014 samt hur bankernas riskrapportering har förändrats sedan år 2011. För att besvara våra frågeställningar studerades tryckt material i form av bland annat årsredovisningar och vi genomförde även två intervjuer med en respondent från Finansinspektionen respektive två respondenter från Sveriges Riksbank.Studiens resultat för den internationella frågeställningen visar att det är de svenska storbankerna som har den lägsta genomsnittliga procentuella differensen mellan ett normalscenario och ett stressat scenario. Det är även de svenska storbankerna som har de högsta genomsnittliga kärnprimärkapitalrelationerna i EBA:s stresstester för åren 2011 respektive 2014. De brittiska och de tyska storbankerna uppnår lägre resultat än de svenska storbankerna. Det finns banker i dessa länder som det krävs ytterligare arbete ifrån för att de vid ett normalscenario ska uppnå Basel III:s grundkrav där kärnprimärkapitalrelationen ska uppgå till minst sju procent. Utifrån vår analys kan vi dra slutsatsen att de svenska storbankerna är de banker som klarar sig bäst med avseende på EBA:s stresstester och bankernas kärnprimärkapitalrelationer.Studiens resultat för den nationella frågeställningen visar att Handelsbanken och Swedbank är de svenska storbanker som klarar sig bäst i Finansinspektionens stresstester. SEB och Nordea däremot uppvisar något sämre resultat och vid något tillfälle når de inte upp till de formella eller de individuella kraven under ett mycket stressat scenario. Vid analys av bankernas årsredovisningar kan vi se en positiv utveckling av deras kärnprimärkapitalrelationer då samtliga svenska storbanker når upp till de strängare formella kraven på 10 respektive 12 procent och även når upp till Finansinspektionens strängare individuella krav för respektive storbank. Vi kan även se en positiv utveckling av de svenska storbankernas riskrapportering och vi kan se att många av bankerna offentliggör mer riskinformation än vad som krävs. Vi kan konstatera att de svenska storbankerna över lag är välkapitaliserade och har inga problem med att nå upp till de nya kraven i Basel III. / Three weaknesses were identified in the global banking sector during the great financial crisis in 2007. These three weaknesses were a lack of capital of sufficient quality to cope with losses, a too closely linked financial market and finally an insufficient liquidity management and too small liquidity buffers. In order to promote a banking sector with stronger resistance Basel III regulations was established to regulate the banks' liquidity, capital adequacy and risk management. The new capital requirements of Basel III means that the core Tier I capital ratio must at least reach seven percent by the year 2019, Sweden and the UK have, however, chosen to set higher standards for their largest banks. Core Tier I capital is the part of Tier I capital that keeps the highest quality and has the best ability to absorb losses. The European Banking Authority (EBA) conducts annual stress tests on banks in the European Union (EU) in order to study how banks can handle adverse scenarios. In a similar way, Finansinspektionen also conducts stress tests on the major Swedish banks.The purpose of this study is from an international perspective to examine what results the major banks in Sweden, the UK and Germany achieve in the EBA's stress test for two years. The study also aims to study from a national perspective how the four major Swedish banks, Handelsbanken, SEB, Nordea and Swedbank achieve in Finansinspektionens own stress tests over a four year period. Finally, the study aims to examine how well the four major Swedish banks live up to the new requirements under the Basel III, with regard to core Tier I capital ratio for the years 2006, 2011 and 2014, as well as how banks' risk reporting has changed since the year 2011. In order to answer our questions, printed material in the form of e.g. annual reports were studied and we also conducted two interviews with respondents from Finansinspektionen and Sveriges Riksbank (the Swedish national bank).The study's results of the international perspective shows that it is the major Swedish banks that have the lowest average percentage difference between a normal scenario and a stressed scenario. It is also the Swedish banks that have the highest average core tier 1 ratios in the EBAs' stress tests for the years 2011 and 2014. The British and German banks achieved lower results than the Swedish banks. There are banks in these countries where further work is needed in order for them at a normal scenario to reach a core Tier 1 capital ratio of at least seven percent. Based on our analysis, we can conclude that the major Swedish banks have the best results both regarding EBAs' stress tests and the banks' core Tier 1 capital ratio.The study's results of the national perspective shows that Handelsbanken and Swedbank are the major Swedish banks with the best results in Finansinspektionens stress tests. SEB and Nordea present slightly lower results and at some time during the test they do not reach the formal or individual requirements in a highly stressed scenario. In the analysis of banks' annual reports, we observe a positive development of their core tier 1 ratios and all major Swedish banks reach the stricter formal requirements of 10 and 12 percent. All the banks also reach Finansinspektionens stricter individual requirements for each major bank. We also observe a positive development of the Swedish banks' risk reporting and we can also see that many of the banks disclose more risk information than is required. We can conclude that the major Swedish banks are well capitalized and have no problems reaching up to the new requirements of Basel III.This essay is written in Swedish

The promotion of Local Economic Development (LED) increasingly involves the allocation of grant finance for project implementation. This finance is often provided on condition that the grant recipient commits a certain level of co-funding to the project. These co-funding requirements are essentially a risk-sharing mechanism used to avert the agency problems, namely adverse selection and moral hazard, which occur in the relationship between the funding programme and the grant beneficiaries. The purpose of this study is to examine whether these requirements are effective at achieving this aim and to determine their impact on the LED outcomes of various types of projects. This is undertaken through the comparative analysis of projects funded through the Gijima KwaZulu-Natal Local Competitiveness Fund Implementation Programme (LCFI), which provided grant funding for projects implemented by the private sector, Non-Governmental Organisations (NGOs) and local government. The findings indicate that co-funding has a positive impact on internally co-funded private sector projects and in this scenario is necessary to achieve optimal outcomes. Inversely, co-funding has a detrimental impact on projects implemented by non-profit groups in that it requires the attraction of funding from additional organisations whose finance conditions may not align to those of the principal donor. Finally, co-funding is ineffective when provided by government for the implementation of community projects due to the lack of risk it assumes. These findings have implications for the design of LED grant programmes and support the assertion that grant programme should be designed to efficiently reflect the objectives and risk preferences of the institutions they support. / Thesis (M.Dev.Studies)-University of KwaZulu-Natal, Durban, 2012.

A guaranteed minimum income benefit (GMIB) is a long-dated option that can be embedded in a deferred variable annuity. The GMIB is attractive because, for policyholders who plan to annuitize, it offers protection against poor market performance during the accumulation phase, and adverse interest rate experience at annuitization. The GMIB also provides an upside equity guarantee that resembles the benefit provided by a lookback option. We price the GMIB, and determine the fair fee rate that should be charged. Due to the long dated nature of the option, conventional hedging methods, such as delta hedging, will only be partially successful. Therefore, we are motivated to find alternative hedging methods which are practicable for long-dated options. First, we measure the effectiveness of static hedging strategies for the GMIB. Static hedging portfolios are constructed based on minimizing the Conditional Tail Expectation of the hedging loss distribution, or minimizing the mean squared hedging loss. Next, we measure the performance of semi-static hedging strategies for the GMIB. We present a practical method for testing semi-static strategies applied to long term options, which employs nested Monte Carlo simulations and standard optimization methods. The semi-static strategies involve periodically rebalancing the hedging portfolio at certain time intervals during the accumulation phase, such that, at the option maturity date, the hedging portfolio payoff is equal to or exceeds the option value, subject to an acceptable level of risk. While we focus on the GMIB as a case study, the methods we utilize are extendable to other types of long-dated options with similar features.